Stamp duty significantly slowing path to purchase for FHB

By Juliet Helmke

May 09 2022
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Saving for a home takes years for the typical first-time buyer. In Australia’s largest cities, as much as two years are spent simply building up the funds to pay the cost of stamp duty, according to new data.

Stamp duty significantly slowing path to purchase for FHB

State and federal government schemes currently offer stamp duty relief and deposit guarantees for first home buyers depending on the purchaser’s income bracket, location, and the price of the property they want to buy. But according to Angus Moore, an economist with PropTrack, those policies may help some first home buyers buy sooner, but there’s a more systemic problem at play that should be addressed.

“Even with concessions in place, for first-home buyers targeting entry-level homes, stamp duty significantly slows the path to purchase,” Mr Moore said.

“For many first-home buyers, it is saving the 20 per cent deposit – rather than servicing the mortgage once they have one – that is the constraint on homeownership,” he noted.

In Sydney, the purchase price for a typical entry-level home for a first home buyer sits at $750,000; in Melbourne, it’s $610,000. As housing prices have risen, so too has the time it takes to save a deposit.

PropTrack’s data shows that 10 years ago, a typical Sydney buyer spent 4.4 years saving for a home deposit. Now it takes 7.1 years. In Melbourne, that duration has elongated from 4.5 years to 6.1 years. Meanwhile, in the country’s smaller markets, that figure has remained largely consistent at roughly four years for both Brisbane and Adelaide.

But stamp duty still accounts for a significant portion of the time spent saving in all of these locations, Mr Moore reported.

“Stamp duty for an entry-level home adds around an extra year of saving in most cities. For more expensive, median-priced homes, stamp duty adds an extra two years’ worth of saving in Sydney and Melbourne and between one and 1.5 extra years in other cities,” he said.

Mr Moore acknowledged that stamp duty concessions for first home buyers in Canberra, NSW, Victoria, Queensland, Western Australia, and Tasmania do help. But all of these programs, except for the ACT’s, place caps on the maximum price of a home that a first-time buyer can purchase.

In Sydney, the first home buyer concession reduces deposit-saving time by around half a year for a relatively affordable home for some buyers. In Melbourne, the concession reduces saving time by as much as one and a half years.

But Mr Moore noted that the caps restrict the savings to only a certain demographic of first home buyers with a restricted set of needs.

“While a more-affordable, entry-level, home may benefit from stamp duty concessions, even median-priced dwellings will not in almost all states,” Mr Moore noted.

“In particular, the caps mean that few detached houses are eligible. Instead, first-home buyers are mainly restricted to apartments. This is not the case in Canberra, as the concession there has no price cap and so all dwellings are eligible”.

About the author

Juliet Helmke

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

About the author

Juliet Helmke

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

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